Greetings Mike,
No, I didn’t take anything personal. I was just defending the potential use of CFDs as a viable option for Andrea.
Again, I have no idea what the gurus say about them, or what their hype is. But like any tool, I believe there are times when a CFD can be a great way to go. And in her case, I feel it should at least be considered.
As I’m sure you know, a Lease Option and a CFD are two completely different animals – contractually, legally, and everything else. And because of those differences, I do NOT view them the same as a Lease Option. I put CFDs in the same category as an AITD, a wrap, a carry-back, or any other form of seller financing. And as a result I don’t look at the buyers as glorified tenants. Nor would I ever qualify them the same way.
I do loans all over the country and could come up with a whole list of reasons why someone may not be able to get loan. Reasons that have nothing to do with them having terrible credit, or being the type of renter that trashes everything, or doesn’t pay their bills. And there are times when a CFD would work quite well these types of people.
Sorry if I wasn’t clear before. My comment about payments being based on purchase price was referring to selling a property on a CFD (not a Lease Option). Again, a Contract for Deed constitutes a sale, which means the payments are based on the purchase price – regardless of what local rents may or may not be. And in CA where I’m located, or NV where Andrea is, that can be a huge difference.
For example, a house here that might have a PITI on a CFD of $2,500/mo may only rent for $1,500/mo. Which obviously wouldn’t work to put a renter in. Which is also what I meant when I referred to eliminating negative cash flow using a CFD.
And in Andrea’s case, where she’s maxed out her equity, and is in a market that rents would not cover her existing payments, a CFD just gives her another option in selling. And it may even give her an edge over other properties for sale in her area.
I’ll say it again, when used right, I think CFDs can be a great tool. Not a strategy, but a tool.
And thank you for sharing a different viewpoint, Mike. Or, should I say, sharing other things for people to consider.
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